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Electoral Bonds | Increasing reporting, mandatory disclosures required for more transparency

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Regulating political donations through regular banking channels has introduced an element of transparency, but there is scope to improve Electoral Bonds | Increasing reporting, mandatory disclosures required for more  transparency

In India, political funding and the mechanism to raise monies remain a bone of contention amid arguments over transparency in donations from individuals, groups, and entities, especially the big corporations. The exercise of conducting elections are now a regular feature every year largely on account of elections to the state assemblies that follow different cycles of completion of tenures.

Elections require political parties to spend huge amount of money for a range of activities, from advertising to logistics, and much more. Over the years parties have raised funds through various methods with donations from supporters, party workers, and businesses (small and big) which poured in largely in the form of cash.

In order to address the challenge of cash collection, and to formalise fund raising channelised through the banking system, the then Finance Minister Arun Jaitley during the 2017 Budget mentioned of electoral bonds aimed at cleansing the mechanism and injecting transparency. Nearly a later, the Government of India notified the scheme.

According to reports compiled by the Association of Democratic Reforms, a non-government organisation working for improvement in India’s electoral system, between March 2018 and July 2022, 18,779 electoral bonds worth Rs 10,245.2 crore were sold, and most of it were encashed by political parties. The ADR and two others challenged the electoral bonds in the Supreme Court, which heard the matter recently, and scheduled to take it up further in December.

During debates, several political parties raised objections when relevant laws of income tax, foreign contributions, companies and representation of the people, were amended to incorporate features of the electoral bonds on the grounds that the new mechanism contained opaqueness. The amendments among other features allowed anonymity to the extent that only the donor knows how much has been distributed to a political party. The government defended the provision that past experience showed that donors did not find attractive the scheme where donations were made public, and thus preferred cash donations. The earlier provision required political parties to identify donations over Rs 20,000.

The electoral bond is the method through which a citizen or a body incorporated in India is eligible to purchase the bond, which is issued for any value in the multiples of Rs 1,000, up to Rs 1 crore. These bonds are issued periodically for a limited time by specified branches of the State Bank of India. These instruments in the form of interest-free promissory notes can be purchased by fulfilling KYC norms and through a bank account. The beneficiary political party identified by the purchaser can get the donation only if it is registered, and secured not less than one percent of the votes at the last Lok Sabha or assembly elections.

Explaining the rationale and benefit of the new system of funding envisaged, late Jaitley had said in an article: “…the choice has now to be consciously made between the existing system of substantial cash donations which involves total unclean money and is non-transparent and the new scheme which gives the option to the donors to donate through entirely a transparent method of cheque, online transaction or through electoral bonds.” He then noted that the government was willing to consider all suggestions to further strengthen the cleansing of political funding.

The idea of regulating political donations through regular banking channels introduced an element of transparency, but there is scope to improve and take steps in the direction of increasing reporting and mandatory disclosures.